By Al McClain
At a "Coffee with…" session at the recent Grocer Manufacturers of America (GMA) Executive Conference, three wholesaler executives provided insights into their operations and the future of wholesaling.
Participating were Michael Bozzuto, chairman/president/ceo of Bozzuto’s in Connecticut, Jay Campbell, Jr., president/ceo of Associated Grocers in Baton Rouge and Bob Hermanns, president & ceo, Associated Grocers, Seattle.
Moderating the panel was Michael Silverstein, senior vice president of the Boston Consulting Group.
It goes without saying that wholesalers and the independents they serve are under serious pressure from Wal-Mart, dollar stores, category killers, the struggling economy, etc. The list of difficulties is rather long, so it was a bit surprising to find these wholesale executives, if not in truly upbeat moods, certainly feisty and ready to continue the good fight and win some battles.
Michael Bozzuto kicked things off, highlighting some of the interesting things Bozzuto’s is up to. Among them, the construction of a 1MM square foot distribution center in 1995 has improved their competitive posture, as has taking the organization from unionized (Teamster’s) to non-union.
Mr. Bozzuto touted wholesalers as the folks who "represent" suppliers to independent stores; said he considers Bozzuto’s to be a "relationship house" and cautioned suppliers to remember that independents are the "chains of the future".
Michael Silverstein laid out the essential problem for wholesalers and independents which he described as "too many stores chasing too few consumers."
Jay Campbell forecast a future for independents with a decline in number, but an improvement in quality.
Mr. Bozzuto felt that it is up to suppliers to support "future chains" and noted that his own organization has grown every year since 1979.
Bob Hermanns said that independents need a special niche to survive, along with the services and buying power of a "virtual chain".
Boston Consulting's Silverstein questioned whether independents can compete on price when their costs are higher than Wal-Mart, et al. Mr. Campbell responded that distributors have to be low cost providers and continuously take costs out of the system. Proving that it can be done, he noted that Wal-Mart super centers have been in his area for 14 years, yet A.G. is still growing. He also counseled that it was key to invest heavily in technology, reward efficiency and penalize inefficiency.
A.G. Seattle used to have an adversarial relationship with suppliers and brokers, according to Mr. Hermanns. That, however, has changed. Now the wholesaler focuses on reinventing the process, even asking suppliers for recommendations on how it may improve. A.G.'s AIM -- Adventures in Merchandising -- program allows retailers to buy pallets at dead-net cost, and they now move about 200 truckloads a month via this program.
Bozzuto’s wants to work with suppliers who are looking for ways to do business differently and are willing to provide truly customized programs. He noted that independents can and need to have 365 events a year versus 52 for chain competitors.
Perhaps the most controversial moment came when Mr. Campbell criticized brokers, saying he views their services as an added cost. He further noted broker consolidation had reduced available services and resources. Mr. Hermanns agreed they were under-served and have to "negotiate" time commitments with brokers.
More than one panelist observed that a truckload should be the largest discount provided by suppliers.
Moderator's Comment: Are grocery wholesalers and the independents they serve receiving equitable treatment from brokers and suppliers? Are wholesalers providing independents with what they need to compete?
We found it interesting that Jay Campbell's criticism of brokers (added costs and less service as a result of consolidation) is similar to sentiments echoed by some independents about their wholesale suppliers. [George Anderson - Moderator]